A medium-sized manufacturing company, which operates in the electronics industry, has employed a firm of consultants to carry out a review of the company's planning and control systems. The company presently uses a traditional incremental budgeting system and the inventory management system is based on economic order quantities (EOQ) and reorder levels. The company's normal production patterns have changed significantly over the previous few years as a result of increasing demand for customized products. This has resulted in shorter production runs and difficulties with production and resource planning.
The consultants have recommended the implementation of activity based budgeting and a manufacturing resource planning system to improve planning and resource management.
How will a manufacturing resource planning system improve the planning of purchases and production for the company?
Select ALL the correct answers.

• A. A manufacturing resource planning approach to the management of all the company's manufacturing
  resources including inventory, labour and machine capacity.
• B. It aims to generate an estimation of materials requirements after taking account of the number of employees quality and waste. The TQS model can be used within MRP provided that the major assumption in the TQS model of constant demand applies.
• C. It seeks to ensure that resources are available just before they are needed by the next stage of production or dispatch. It also seeks to ensure that resources are delivered only when required so that raw material inventory is kept to a minimum.
• D. The traditional approach to determine material requirements is to monitor inventories constantly; whenever they fall to a predetermined level, a preset order is placed to replenish them. This traditional approach (involving re-order levels and economic order quantity calculations originates in the pre-computer era.
• E. The technique will not enable managers to track orders through the manufacturing process and will not assist the purchasing and production control departments to move the right amount of material or sub- assemblies at the right time to the right place.
• F. The correct inventory management system relies on the assumption that there is constant demand. An MRP system begins with the setting of a master production schedule specifying both the timing and quantity demanded of each of the finished goods items and then works backwards to determine the resource requirements at each stage of the production process.

RS is a travel company providing daily tours of a major European capital city. The market is highly competitive and RS has commissioned some market research to help with the pricing decision for a new tour. The research identified the probability of three possible market conditions and the number of tickets that would be sold each day at three different price levels.

Demonstrate, using a decision tree and based on expected value, which ticket price RS should choose.

• A. RS should charge a ticket price of $75
• B. RS should charge a ticket price of $100.
• C. RS should charge a ticket price of $80.
• D. RS should charge a ticket price of $70.
• E. RS should charge a ticket price of $90.

A company is preparing its annual budget and is estimating the number of units of Product A that it will sell in each quarter of year 2. Past experience has shown that the trend for sales of the product is represented by the following relationship:
y = a + bx where
y = number of sales units in the quarter a = 10,000 units b = 3,000 units x = the quarter number where 1 = quarter 1 of year 1 Actual sales of Product A in Year 1 were affected by seasonal variations and were as follows:
Quarter 1:14,000 units Quarter2: 18,000 units Quarter 3: 18,000 units Quarter 4: 20,000 units Calculate the expected sales of Product A (in units) for each quarter of year 2, after adjusting for seasonal variations using the additive model.

• A. The expected sales for year 2 Quarter 4 was 40000 units
• B. The expected sales for year 2 Quarter 4 was 33000 units
• C. The expected sales for year 2 Quarter 4 was 32700 units
• D. The expected sales for year 2 Quarter 4 was 32000 units

RT produces two products from different quantities of the same resources using a just-in-time (JIT) production system. The selling price and resource requirements of each of the products are shown below:

Market research shows that the maximum demand for products R and T during June 2010 is 500 units and 800 units respectively. This does not include an order that RT has agreed with a commercial customer for the supply of 250 units of R and 350 units of T at selling prices of $100 and $135 per unit respectively. Although the customer will accept part of the order, failure by RT to deliver the order in full by the end of June will cause RT to incur a $10,000 financial penalty. At a recent meeting of the purchasing and production managers to discuss the production plans of RT for June, the following resource restrictions for June were identified:
Direct labour hours 7,500 hours
Material A 8,500 kgs
Material B 3,000 litres
Machine hours 7,500 hours
Assuming that RT completes the order with the commercial customer, prepare calculations to show, from a financial perspective, the optimum production plan for June 2010 and the contribution that would result from adopting this plan.
The optimum production plan will be:

• A. Contract: R = 250, T = 360 and Market: R = 500 T = 710
• B. Contract: R = 250, T = 360 and Market: R = 660 T = 720
• C. Contract: R = 250, T = 360 and Market: R = 500 T = 700
• D. Contract: R = 250, T = 360 and Market: R = 600 T = 710
• E. Contract: R = 250, T = 360 and Market: R = 650 T = 710